Pakistan Equity | Technology

REP-057 April 12, 2021

Prices as of April 08, 2021

Topline Pakistan Tech Days 2021

Conference Takeaways

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Table of Contents

Contents Page No.

TRG Pakistan Limited 3

Avanceon Limited 7

NetSol Technologies Limited 10

Systems Limited 13

TPL Trakker Limited 16

Analyst Certification and Disclosures 20

*We also hosted Telecard Limited (TELE) and Universal Network Systems Limited (unlisted). However, we refrain from publishing commentary on
both due to our conflict of interest.
Pakistan Tech Days 2021 2
TRG Pakistan Limited

Not Rated The key speaker was Mr. Zia Chishti, CEO TRG Pakistan.
KATS Code TRG
He highlighted that TRG Pakistan has no real operations as such, however it owns
Bloomberg Code TRG PA
Reuters Code TRG.KA ~45% stake in TRG International.
Market Price Rs148.48
TRG International has three different portfolio investments (1) IBEX (market cap:
Market Cap Rs81.0bn/US$529.3mn
US$400mn) with a stake of ~60% stake, (2) E-Telequote (unlisted) with a stake of 70%,
Free float Market Cap Rs68.8bn/US$449.9mn
1-Yr Avg. Daily Vol. (mn) 21.7 and (3) Afiniti (unlisted) with a stake of ~40%.
1-Yr Avg. Daily Val. (mn) Rs1708.0/US$11.2
IBEX is an outsourcing call center and was recently listed at NASDAQ. E-Telequote is a
1-Yr High/ Low Rs166.65/14.97
Estimated free float 85% health insurance marketing company with focus on markets like US, whereas Afiniti is
Share outstanding (mn) 545.39 engaged in providing artificial intelligence.
Weight in KSE-100 3.57%
All of the segments of TRG International were EBITDA positive in 1H21. The overall
positive trend is expected to continue.
Relative performance: TRG vs. KSE-100 Index
Afiniti had over US$200mn revenues with a positive EBITDA in 1H21. Afiniti 5-Year
TRG KSE-100
1200% revenue CAGR is over 70%. Management is bullish on the future growth of the business.
1000%
As per management, it is not yet decided whether Afiniti will be listed or liquidity will
800%
be generated through other means. There is no urgency in listing this business as
600%
company is adequately capitalized and has excellent access to capital market
400%
200%
(including debt).

0% As per Series D valuation, investors in Afiniti will either get a guaranteed 25% IRR or
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common shares at a valuation of US$1.6bn. A third option is to enter into Series E

financing with an IRR accrued valuation. TRG International has monetized majority of
Source: PSX, Topline Research its investment in Afiniti at a guaranteed IRR of 25%.

Pakistan Tech Days 2021 3

TRG Pakistan Limited

Afiniti is operating in more than 12 countries with large exposure in US. Its largest vertical is the telecom sector. This business is further expanding into
healthcare, insurance, banking, travel and hospitality sectors.

Afiniti has more than 200 patents at this stage and this gives tough competition to new entrants to navigate a large portfolio like Afiniti’s.

Chatbots has small size and presence in market and that is unlikely to alter growth trend of Afiniti anytime soon. Afiniti will continue to evolve itself till
chatbots gain some maturity.

IBEX has better growth prospects than its peers due to its specialization and presence in international markets. Historic growth of this segment has
been 9-11%.

Management said, they continue to evaluate different paths to monetize E-Telequote. Like Afiniti, E-Telequote is also at sufficient scale to tap public
capital markets. Other strategic alternatives are also in offing.

There are multiple pathways to bring back liquidity to TRG Pakistan (from divestment proceeds realized by TRG International) such as (1) distribution of
cash dividend, (2) buy back of TRG Pakistan shares and (3) specie dividend of other companies (after listing of all companies) to Pakistan shareholders.

Other development can also be listing of TRG International once numbers of all three assets (IBEX, Afiniti and E-Telequote) are clear in terms of
valuation and EBITDA.

From Afiniti proceeds and public listing of IBEX, the company has retired debt of ~US$80mn from TRG International with outstanding debt at
~US$50mn. Hence, capital did not flow back to TRG Pakistan other than approximately $15m.

If in future capital flows back to TRG Pakistan, then it will be board’s decision whether to distribute it or invest it further.

Considering tax efficiency, for investors in Pakistan the preference of distribution will be following (1) specie dividend, (2) buy back of shares and (3)
cash dividend.

Pakistan Tech Days 2021 4

TRG Pakistan Limited

Mr. Zia owns approximately 80mn shares (less than 20%) in TRG Pakistan and has a direct interest of ~18% stake in TRG International.

At this point in time, company is not contemplating any new investment. However, if anything compelling comes in, then new investment can not be
ruled out.

Company is least affected by new expected taxation rules of US on IT companies as Afiniti is registered in Bermuda (tax free).

There are also talks about global minimum tax. There is no clear path to that but is being discussed around the world. Implementation of this will have
significant impact on company.

From valuation perspective, management stated, IBEX is publicly traded so its current market will be best guess.

E-Telequote multiples can be compared with listed peers like E-Health, Go Health and Select Quote.

Afiniti comparable are also available as recently few high growth AI companies like C3.AI and Palantir are listed at US exchange.

The outstanding debt of US$50mn on TRG International should also be subtracted to reach valuation of TRG Pakistan.

The management has provided a disclaimer that numbers discussed are approximate and may not be accurate and that future results may not be as
anticipated/projected.

Pakistan Tech Days 2021 5

Financial Snapshot

Income Statement (June Year End) Key Ratios

Rsmn FY17A FY18A FY19A FY20A 1HFY21A FY17A FY18A FY19A FY20A
Net sales 214 229 241 237 82 Revenue Growth 28% 7% 5% -2%
Admin and other expenses 208 445 239 234 25 Earning growth -94% NM NM NM
Operating profit 6 (217) 2 3 56 Operating Margin 3% -95% 1% 1%
Share of profit - - 87 5,158 Net Margin 2% -95% 1% 32%
Profit before taxation 6 (217) 2 90 5,214 PE at Rs148.8 NM NM NM NM
Taxation 1 1 1 14 790 PBV at Rs148.8 6 5 5 4
Profit for the year 5 (218) 2 76 4,425 PS at Rs148.8 378 354 336 341
EPS (Rs) 0.01 (0.40) 0.00 0.14 8.11 Return on Assets 0% -1% 0% 0%
Source: Company Accounts, Topline Research Return on Equity 0% -1% 0% 0%
Effective tax rate 16% 0% 22% 15%
Balance Sheet Source: Company Accounts, Topline Research
Rsmn FY17A FY18A FY19A FY20A 1HFY21A
Non-Current Assets 15,007 16,139 17,972 21,779 25,746
Current Assets 227 1,635 2 1,584 1,653
Total Assets 15,234 17,773 17,974 23,363 27,400

Equity 12,780 14,859 15,154 19,404 22,817

Non-Current Liabilities 2,228 2,830 2,791 3,929 4,524
Current Liabilities 226 84 29 29 58
Total Equity & Liabilities 15,234 17,773 17,974 23,363 27,400
Source: Company Accounts, Topline Research

Pakistan Tech Days 2021 6

Avanceon Limited

Not Rated The key speaker was Mr. Bakhtiar Wain, CEO Avanceon Limited.
KATS Code AVN
The principal activity of the company is to provide industrial automation, process
Bloomberg Code AVN PA
Reuters Code AVN.KA control and systems integration solutions.
Market Price Rs90.82
The company operates in Operational Technology (OT) category, which is their
Market Cap Rs19.4bn/US127$mn
Free float Market Cap Rs5.3bn/US$35mn value proposition. The business model is to provide real time data to
1-Yr Avg. Daily Vol. (mn) 3.9 manufacturing companies via digital subscription model.
1-Yr Avg. Daily Val. (mn) Rs278.0/US$1.8
1-Yr High/ Low Rs108.24/22.17 This includes (1) Dashboard, KPIs & Analytics, (2) Automated Online and PDF
Estimated free float 27% reporting, (3) Personalized ad hoc info access on PDAs, (4) Bank and recovery of
Share outstanding (mn) 213.80
data at any time, (5) 100% cyber secure RAM 99.9% high available, (6) 24/7 call
Weight in KSE-All index 0.25%
center agents and helpline, (7) Designated customer success team for data &
reporting consultancy, and (8) Perpetual monthly changes & modifications.
Relative Performance: AVN vs. KSE-100 Index
AVN KSE-100 Avanceon believes that they have no real competition as they have customized
370%
products and because of the speed they deliver which no one offers. To highlight,
305%
Avanceon delivers product within fifteen days of order receiving.
240%
175% Over the period of three years, order generation has increased from US$38mn in
110% 2018 to US$59mn in 2020.
45%
COVID-19 has not impacted operations as they implemented work from home
-20%
policy. All projects were delivered and serviced on time during lockdown.
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Going forward, company’s focus is to investment in the latest technology which will
Source: PSX, Topline Research help company reduce cost, and improve quality.

Pakistan Tech Days 2021 7

Avanceon Limited

Company has demerged its Jewel Crown service business to digital intellectual property called Octopus for which IPO is expected in 2021.

Octopus’s business model is divided into three segments which includes (1) OmniConnet, (2) Topware and (3) After-Market Service (AMS).

OmniConnect converts plant’s data into dashboards within days after receiving client’s go ahead. The process includes (1) collection of data, (2) ingests
and pushes to any cloud, (3) stores data into any open cloud data repository, (4) configure KPIs as needed, (5) perform operations as required and (6)
publish data on any visualization or a BI tool.

Topware includes three subscription based services including digital dash boarding with data analytics, asset management, advanced predictions and
prescriptions.

AMS, which is the aftermarket support, has been the driving factor in covering almost 50% of the fixed cost. To note, with over 40 service agreements
in place, AMS is the only source of recurring revenue.

Geographically, revenue mix has changed where Pakistan’s revenue contribution declined from 60% to 30%, while in terms of growth, revenue has
shown exponential growth.

There is a zero percentage tax on export sales which resulted in effective tax to clock in at 13-14%.

Regarding IT policy, management’s view is that the current policy is good in terms of taxation while new policy would help transfer intercompany
capital.

Pakistan Tech Days 2021 8

Financial Snapshot

Income Statement – Consolidated (December Year End) Key Ratios

Rsmn 2016A 2017A 2018A 2019A 9M2020A 2016A 2017A 2018A 2019A
Net sales 2,064 2,814 3,481 4,896 3,623 Revenue Growth 26% 36% 24% 41%
Gross Profit 747 975 967 1,484 1,007 Earning growth 38% 69% 23% 32%
Admin & selling Expenses 322 408 586 705 487 Gross Margin 36% 35% 28% 30%
Other Expenses 10 4 5 4 3 Operating Margin 22% 24% 24% 22%
Other Income 32 105 465 313 332 Net Margin 16% 20% 20% 19%
Finance cost 50 70 61 124 97 PE at 90.82 58 34 28 21
Profit before tax 397 598 780 963 753 PBV at Rs90.82 9 7 6 4
Profit after tax 333 563 692 912 746 PS at Rs90.82 9 7 6 4
EPS (Rs) 1.6 2.6 3.2 4.3 3.5 Return on Assets 10% 12% 12% 11%
Source: Company Accounts, Topline Research Return on Equity 15% 21% 20% 20%
Effective tax rate 16% 6% 11% 5%
Balance Sheet Source: Company Accounts, Topline Research
Rsmn 2016A 2017A 2018A 2019A 9M2020A
Non-Current Assets 831 909 1,121 1,378 1,455
Current Assets 2,454 3,688 4,872 6,979 7,429
Total Assets 3,285 4,597 5,993 8,357 8,884

Equity 2,192 2,738 3,434 4,507 5,278

Non-Current Liabilities 109 121 154 149 181
Current Liabilities 984 1,738 2,406 3,701 3,425
Total Equity & Liabilities 3,285 4,597 5,993 8,357 8,884
Source: Company Accounts, Topline Research

Pakistan Tech Days 2021 9

NetSol Technologies Limited

Not Rated The key speaker was Salim Ghauri, CEO NetSol Technologies.
KATS Code NETSOL
The core business of the company is development and sale of computer software
Bloomberg Code NETSOL PA
Reuters Code NETSOL.KA and allied services in Pakistan as well as across the world. The major focus of the
Market Price Rs165.25 company is on financial application.
Market Cap Rs14.8bn/US97$mn
Free float Market Cap Rs5.2bn/US$34mn Major customers are Daimler and BMW in automobile industry.
1-Yr Avg. Daily Vol. (mn) 3.4
NetSol has completed second generation application called NFS Digital.
1-Yr Avg. Daily Val. (mn) Rs571.6/US$3.7
1-Yr High/ Low Rs300.06/34.96 In 2008, from scratch the company has developed first generation application
Estimated free float 35%
called NFS Ascent. NFS Ascent is still managing portfolio of 27 customers and will
Share outstanding (mn) 89.80
Weight in KSE-All index 0.19% be used for next 5-10 years. Till today, NFS Ascent generates a revenue of more
than US$310mn.

Relative performance: NETSOL vs. KSE-100 Index NFS Ascent is a complete eco-system that originates and manages complete

800% NETSOL KSE-100 contract lifecycle. It also empowers Fintech enablement through a service
700% ordinated architecture.
600%
500% NetSol has changed its strategy from traditional license based model to
400%
subscription based (SAAS) model.
300%
200% Customer will get benefits under SAAS model due to (1) shorter and agile delivery
100%
0% model, (2) lower delivery costs, (3) lower support costs, (4) minimum efforts
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required, (5) standard regional solution, (6) lower maintenance cost for
organization, and (7) few resources for implementation and support.
Source: PSX, Topline Research

Pakistan Tech Days 2021 10

NetSol Technologies Limited

Under SAAS model, company can keep lower staff, which will result in lower costs, while the numbers may take time to reflect.

USA parent company holds majority stake of 66% stake in NetSol.

To highlight, US company is also a distributor of NetSol. The revenue sharing is roughly 60% for developer and 40% for distributor.

Third wave of COVID-19 is not an issue for the company as the company is working normally by working from home.

In coming days there would be change in buying pattern in auto industry which includes shifting from physical buying via showroom to online. The
company will take it as an opportunity to develop new products.

Key challenges for the company in next five years would be (1) to develop application that meets changing requirement and (2) shortage of resources
as IT industry is now in a mature stage.

Pakistan Tech Days 2021 11

Financial Snapshot

Income Statement – Consolidated (June Year End) Key Ratios

Rsmn FY17A FY18A FY19A FY20A 1HFY21A FY17A FY18A FY19A FY20A
Net sales 4,519 4,285 5,381 4,708 2,379 Revenue Growth 11% -5% 26% -13%
Gross Profit 1,455 1,936 2,091 1,566 948 Earning growth 51% 463% 15% -97%
Selling Expenses 443 572 669 455 250 Gross Margin 32% 45% 38% 33%
Admin expenses 702 744 748 768 372 Operating Margin 8% 27% 26% 7%
Other Income 52 523 1,046 255 90 Net Margin 6% 27% 24% 1%
Finance cost 31 44 40 49 30 PE at Rs166.35 76 14 12 415
Profit before tax 329 1,096 1,369 207 302 PBV at Rs166.35 2.5 2.1 2.0 2.2
Profit after tax 286 1,144 1,291 44 257 PS at Rs166.35 3.31 3.49 2.78 3.17
EPS (Rs) 2.2 12.3 14.1 0.4 2.9 Return on Assets 4% 13% 14% 0%
Source: Company Accounts, Topline Research Return on Equity 5% 16% 18% 1%
Effective tax rate 13% 5% 6% 79%
Balance Sheet Source: Company Accounts, Topline Research
Rsmn FY17A FY18A FY19A FY20A 1HFY21A
Non-Current Assets 3,962 3,562 3,195 2,682 2,551
Current Assets 3,819 5,495 6,256 6,408 6,790
Total Assets 7,781 9,057 9,451 9,090 9,341

Equity 6,007 7,079 7,320 6,908 7,174

Non-Current Liabilities 30 40 63 187 176
Current Liabilities 1,744 1,938 2,068 1,995 1,991
Total Equity & Liabilities 7,781 9,057 9,451 9,090 9,341
Source: Company Accounts, Topline Research

Pakistan Tech Days 2021 12

Systems Limited

‘Hold’ Rated The key speakers were Mr. Asif Peer, CEO Systems Limited and Ms. Roohi Khan,
KATS Code SYS CFO Systems Limited.
Bloomberg Code SYS PA
Reuters Code SYS.KA Systems Limited is principally engaged in the business of software development,
Market Price Rs446.92 trading of software and business process outsourcing services.
Market Cap Rs61.3bn/US401$mn
Free float Market Cap Rs36.4bn/US$238mn The company offers variety of products which includes (1) cloud & technology
1-Yr Avg. Daily Vol. (mn) 0.3 services, (2) business solutions, (3) Data and AI, (4) Intelligent Automation, (5)
1-Yr Avg. Daily Val. (mn) Rs77.4/US$0.5
Enterprise Integration, and (6) Retail & Digital commerce.
1-Yr High/ Low Rs470.53/100.99
Estimated free float 59% System Limited holds 100% stake in TechVista Dubai and System Ventures each,
Share outstanding (mn) 137.10
while it holds 44.60% stake in EP Systems (Oneload).
Weight in KSE-All index 1.89%
As of Dec-2020, employees holds 51.47% stake (34.33% local and 17.13% retired)

Relative performance: SYS vs. KSE-100 Index while rest is with institutions and others (foreigners 19.23%, local 20.61% and
SYS KSE-100 others 8.69%) in System Limited.
400%
Consolidated revenue breakup includes 18% Telco, 17% BSF-services, 15% retail &
300%
CPG, 16% BPO, 9% Technology, 7% Government sector and 18% others.
200%

100% System’s focus will remain on export side rather than domestic. To note, in 2020,
85% of total revenue pertains to exports.
0%

-100% To highlight, 70% of revenue comes by their own efforts, while 30% comes from
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their alliances and partners.

On domestic front, focus of company is to remain in the private sector where

Source: PSX, Topline Research
management expects 80% contribution from the private sector vs. 20% previously.
Pakistan Tech Days 2021 13
Systems Limited

Geographical, North America contributes 44% in total revenues, followed by Middle East 27%, Pakistan 20% and Europe 8%.

As of Dec-2020, company holds a cash balance of Rs3,971mn compared to Rs1,624mn in 2019. The company is waiting for the right time to invest in
growth companies.

Furthermore, management expects strong recovery in terms of cash flow from USA and Europe after summers. The company does not see any
bankruptcy to happen due to lockdown amidst COVID-19.

OneLoad has reached a retail network of 38,077 in 2020 compared to 31,879 in 2019 which is at a slower pace compared to its peers. Management is
trying to catchup with other players and is very confident.

Round of financing is always on cards but in OneLoad perspective it will be done once there will be liquidity requirement or valuation seems
extraordinary.

After lifting of embargos and travel restrictions from Qatar, management sees significant growth. Keeping in mind world cup in 2022, revenues can be
doubled.

In terms of expansion, company still has enough infrastructure to utilize. However, HR would be a major cost and if demand is increasing at a higher
rate this will impact on increase in salary cost by 15%.

Topline has recently initiated coverage on Systems Limited with report titled ‘Riding the IT Revolution’ dated March 9, 2021. Please refer to our report
for our view and details. To highlight, we have a Hold stance on SYS with Dec-2021 Target Price of Rs502.

Pakistan Tech Days 2021 14

Financial Snapshot

Income Statement – Consolidated (December Year End) Key Ratios

Rsmn 2016A 2017A 2018A 2019A 2020A 2016A 2017A 2018A 2019A 2020A
Net sales 3,112 3,832 5,324 7,536 9,877 Revenue Growth 26% 23% 39% 42% 31%
Gross Profit 890 1,149 1,529 2,369 3,257 Earning growth 19% 17% 88% 48% 39%
Selling and distribution expenses 48 59 91 178 201 Gross Margin 29% 30% 29% 31% 33%
Admin expenses 354 484 573 698 722 Operating Margin 15% 15% 21% 22% 24%
Other Income 29 115 408 318 235 Net Margin 15% 15% 20% 21% 22%
Finance cost 5 16 27 47 67 PE at Rs446.92 126 107 57 39 28
Profit before tax 474 569 1,108 1,600 2,282 PBV at Rs446.92 22 19 15 11 8
Profit after tax 482 561 1,061 1,567 2,164 PS at Rs446.92 20 16 12 8 6
EPS (Rs) 3.55 4.16 7.84 11.58 16.12 Return on Assets 16% 14% 20% 21% 19%
Source: Company Accounts, Topline Research Return on Equity 17% 17% 25% 28% 27%
Effective tax rate -2% 1% 4% 2% 5%
Balance Sheet Source: Company Accounts, Topline Research
Rsmn 2016A 2017A 2018A 2019A 2020A
Non-Current Assets 725 1,095 1,280 1,849 1,967
Current Assets 2,383 2,891 4,087 5,529 9,508
Total Assets 3,107 3,986 5,367 7,378 11,476

Equity 2,800 3,225 4,169 5,529 7,976

Non-Current Liabilities 15 21 25 185 397
Current Liabilities 292 740 1,173 1,664 3,103
Total Equity & Liabilities 3,107 3,986 5,367 7,378 11,476
Source: Company Accounts, Topline Research

Pakistan Tech Days 2021 15

TPL Trakker Limited

Not Rated The key speaker was Mr. Sarwar Ali Khan, CEO TPL Trakker.
KATS Code TPLT
TPL Trakker is wholly owned subsidiary of TPL Corp, where TPL Holding is the
Bloomberg Code TPLT PA
Reuters Code TPLT.KA ultimate parent company. In August 2020, company got listed via Initial Public
Market Price Rs10.11 Offering (IPO) in Pakistan Stock Exchange, where they raised Rs802mn.
Market Cap Rs1.9bn/US12$mn
Free float Market Cap Rs0.8bn/US$5mn The business model is divided into three categories;
1-Yr Avg. Daily Vol. (mn) 0.2
Connected Car – provides real time location tracking, driver behavior analysis,
1-Yr Avg. Daily Val. (mn) Rs2.2/US$0.01
1-Yr High/ Low Rs11.34/9.37 usage based insurance, video vehicle telematics, driver fatigue monitoring,
Estimated free float 40% predictive maintenance and fleet management.
Share outstanding (mn) 187.30
Weight in KSE-All index 0.02% Digital Mapping and Location Services – provides container security solution,
location based advertising, route planning & optimization, data & API/SDK, and

Relative performance: TPLT vs. KSE-100 Index navigation & GIS services.

20% TPLT KSE-100 Industrial IoT Solutions – provides e-ticketing solutions, genset monitoring, fuel

10%
management, smart agriculture, water level monitoring and smart warehousing.

0% TPL Trakker holds 100% market share in Digital Mapping and Industrial IoT
Solutions, while it also holds 42% market share in the telematics business.
-10%

-20% The company has changed its business model from traditional to (Software-as-a-
Service) SAAS based model. TPL Trakker has developed its own software which
-30%
enables them to connect with third party tracking device where it will provide
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value added services such as video telematics, predictive maintenance, usage-

Source: PSX, Topline Research based insurance and driver behavior analysis. This will increase geographical reach.

Pakistan Tech Days 2021 16

TPL Trakker Limited

Gross margins in digital mapping and location service segment is around 75% which is expected to increase as fixed cost is one time and is already
incurred at the time of data collection.

The business strategy is to offer its customers either license or company’s own B2B solutions such as Dart (route optimization and delivery
management solution) and Go connect (geo-marketing solution). On international front, TPL Trakker license its data to plug-in and enrich their own
apps similar to what they do with foodpanda.

On navigation side, company is generating annual revenue of around Rs80-85mn. The largest customers in this category are Toyota and Honda. The
management expects potential growth in this segment because of newly launched companies.

There is high barriers to entry in container tracking business due to (1) very high capital-intensive business, (2) it being a highly regulated business and
required clearance by Ministry of Interior and (3) tough FBR process.

TPL Trakker is only tracking company having offices inside the Gwadar port and since May-2020 tracking containers that are leaving Gwadar.

As part of long term strategy, TPL Trakker took management control in a company called Trakker Middle East (previously minority interest). The idea
was to move towards cloud-based solutions and provide their services outside Pakistan. This enables the company to host cloud solutions in Middle
East and have lot of cheaper options available including Amazon and Microsoft etc.

TPL Trakker has entered into partnership with company called HERE Maps in order to get their maps and platforms which allow them to port their
solutions on HERE’s platforms and host in the Middle East.

During this year, TPLT has commercially launched their maps where they started licensing data APIs to foodpanda, BYKEA, Telenor and others.

During first wave of COVID-19, TPL Takker came up with a solution which is also currently being used by government to help visualize corona cases
with respect to population density of those areas. This is the technology behind which smart or micro-lockdowns started happening in June last year.

Pakistan Tech Days 2021 17

TPL Trakker Limited

TPL Trakker launched product called Trakker pro last year which is first of its kind in tracking industry and got a good response. The feature of this
product is that if any one does not recover his vehicle, company will give him value of the vehicle which they initially told when bought the product.

The company is in conversion with Careem and Uber to take them on board to use their mapping services.

The company’s model is similar to Google’s model in terms of charging fees. It uses “Pay as you go model” i.e. charges per API.

TPL Trakker’s bottom line is linked with volumes as most of the costs are fixed in nature. That said, uptick in economy including growth in automobile
and container businesses, bottom line is estimated to clock in at Rs95mn in FY21 from a loss of Rs462mn in FY20.

From a long term perspective, if Google wants to come in Pakistan they would look to partner or invest with TPL Trakker rather than having to compete
as they have collaborative relationship with them.

Customer base defines the company’s credit cycle as larger revenue is coming from connected car business where as larger chunk pertains to financial
institutions, insurance companies and government entities which took larger time to settle payments.

Pakistan Tech Days 2021 18

Financial Snapshot

TPL Income Statement- Consolidated (June Year End) Key Ratios

Rsmn FY18A FY19A FY20A 1HFY21A FY18A FY19A FY20A
Net sales 1,661 1,772 1,605 1,005 Revenue Growth NM 7% -9%
Gross Profit 999 1,005 624 333 Earning growth NM -63% NM
Distribution expenses 264 286 324 46 Gross Margin 60% 57% 39%
Admin expenses 412 368 415 277 Operating Margin 21% 21% 3%
Other Expenses 19 31 - 15 Net Margin 6% 2% -29%
Other Income 48 61 161 80 PE at Rs10.11 19 53 NM
Finance cost 224 310 515 183 PBV at Rs10.11 2 1 1
Loss/Profit before tax 129 71 (470) (149) PS at Rs10.11 1.1 1.1 1.2
Tax 31 35 (11) 64 Return on Assets 2% 1% -7%
Profit after tax 97 36 (459) (213) Return on Equity 8% 2% -30%
EPS (Rs) 0.52 0.19 (2.45) (1.14) Effective tax rate 24% 49% 2%
Source: Company Accounts, Topline Research Source: Company Accounts, Topline Research

TPL Balance Sheet

Rsmn FY18A FY19A FY20A 1HFY21A
Non-Current Assets 2,316 2,893 3,453 3,770
Current Assets 2,311 2,385 2,687 3,013
Total Assets 4,627 5,278 6,140 6,783

Equity 1,199 1,613 1,554 2,196

Non-Current Liabilities 909 501 649 904
Current Liabilities 2,519 3,164 3,938 3,683
Total Equity & Liabilities 4,627 5,278 6,140 6,783
Source: Company Accounts, Topline Research

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Analyst Certification and Disclosures

The research analyst(s), denoted by an “AC” on the cover of this report, primarily involved in the preparation of this report, certifies that (1) the views expressed in this report accurately reflect his/her personal
views about all of the subject companies/securities/sectors and (2) no part of his/her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this
report.
Furthermore, it is stated that the research analyst or its close relative have neither served as a director/officer in the past 3 years nor received any compensation from the subject company in the past 12
months.
Additionally, as per regulation 8(2)(i) of the Research Analyst Regulations, 2015, we currently do not have a financial interest in the securities of the subject company aggregating more than 1% of the value of
the company.

Rating System
Topline Securities employs three tier ratings system to rate a stock, as mentioned below, which is based upon the level of expected return for a specific stock. The rating is based on the following with time
horizon of 12-months.
Rating Expected Total Return
Buy Stock will outperform the average total return of stocks in universe
Neutral Stock will perform in line with the average total return of stocks in universe
Sell Stock will underperform the average total return of stocks in universe
For sector rating, Topline Securities employs three tier ratings system, depending upon the sector’s proposed weight in the portfolio as compared to sector’s weight in KSE-100 Index:
Rating Sector’s Proposed Weight in Portfolio
Over Weight > Weight in KSE-100 Index
Market Weight = Weight in KSE-100 Index
Under Weight < Weight in KSE-100 Index
Ratings are updated daily to account for the latest developments in the economy/sector/company, changes in stock prices and changes in analyst’s assumptions or a combination of any of these factors.

Valuation Methodology
To arrive at our 12-months Target Price, Topline Securities uses different valuation methods which include: 1). Present value methodology, 2). Multiplier methodology, and 3). Asset-based methodology.

Research Dissemination Policy

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Nevertheless, all clients may not receive the material at the same time.

Disclaimer
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without prior consent of Topline Securities. Action could be taken for unauthorized reproduction, distribution or publication.

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Contact Us

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